24 Oct 2021

Lightning use will outpace capacity growth

The Lightning Network’s public capacity has increased exponentially in 2021 and now has a capacity of more than 3,100 BTC, which is about $200M with the current bitcoin price.
Public capacity do not, however, tell us anything explicit about people’s use of the Lightning Network. In the work on our report about the Lightning Network, we were able to gather data that let us estimate the use from certain participants of the Lightning Network.This blog post is based on findings from our newly published report on the Lightning Network, The State of Lightning.Powered by OpenNode - Supported by Lightning LabsMore explicitly, we were able to make estimates for the use from people using the wallet providers such as Wallet of Satoshi, Blue Wallet, Phoenix, Breez etc. Our estimates must, therefore, not be interpreted as total volumes for the Lightning Network. Still, we believe the usage through easy-to-use wallet providers is a good measuring stick for mainstream adoption. For more details on what usage is included in our estimates, see the figure below.
Our data shows that growth in public capacity is significantly lower than user and usage growth on the Lightning Network. Since 2019, monthly usage growth has been 2-6 times higher than growth in the public capacity. In total, from January 1st, 2020 to September 30th, 2021, usage on the Lightning Network grew by 12 times the growth in public capacity. Comparing payment volume with network capacity also indicates that payment volume is in no way limited by network capacity. Going forward, network capacity will most likely increase in tandem with adoption but payment volume can increase many times more without hitting network capacity limitations.
User and usage growth have moved in tandem until September this year but in September, the amount of users with Lightning access grew by almost 10 million while payment volume doubled. The break in this relationship largely comes from El Salvador’s bitcoin adoption and payment solutions with large existing user bases launching Lightning integrations. It will be highly interesting to observe to what degree the Lightning integrations on more general payment solutions like Chivo, Paxful, and Strike will be utilized. When writing this, we haven’t really seen any data that gives us a clear view of how Lightning usage is developing in October. However, we hope to obtain data to make estimates for October at month’s end and present the findings at the Adopting Bitcoin conference in El Salvador.In our report, we sketched a possible adoption path for Lightning adoption in El Salvador, shown in the figure below. Widespread use of new technology usually takes time but when a critical mass is obtained, adoption increases fast. According to our development path, adoption will be relatively low well into 2022 before picking up sharply. It’s extremely likely that our adoption path will be wrong but comparing actual development with the path going forward will be interesting.
Bitcoin and the Lightning Network can provide access to a well-functioning monetary system for billions of unbanked and easier access for millions of already banked. What we’ve seen so far in El Salvador is only the beginning. Other countries will likely copy El Salvador’s approach in the future. In terms of Lightning Network activity, the implications can be huge.In The State of Lightning, we look closer at the implied Lightning activity if more countries adopt bitcoin. We also show how streaming of money to pay for subscription services like Netflix, Spotify and gaming can drive Lightning activity through the roof. Want to have a closer look, check out the full report below.
Share this article